Hong Kong Stocks mixed on tariff threat

Headline indices of the Hong Kong share market were mixed on Monday, 03 June 2019, as investors confidence for risk assets dampened on heightened Sino-US trade tensions and Washington's threat of tariffs on Mexico stoked worries of a global recession. Around late afternoon, the Hang Seng Index declined 0.1%, or 29.36 points, to 26,871.73. The Hang Seng China Enterprises Index was up 0.5%, or 50.19 points, to 10,437.36.

The risk sentiments were muted in the city market due to worries that a prolonged U.S.-China trade war and Washington's tariff threat to Mexico could derail the global economy. On Friday, the Trump administration eliminated India's ability to export products to the US duty-free. Further, President Trump threatened to impose tariffs on Mexico over immigration.

Meanwhile, China implemented tariff hikes Saturday and launched an investigation into FedEx after it diverted two parcels destined for Huawei addresses in Asia to the United States.

A senior Chinese official said on Sunday that United States cannot use pressure to force a trade deal on China, refusing to be drawn on whether the leaders of the two countries would meet at the G20 summit to bash out an agreement. China threatened on Friday to unveil an unprecedented hit-list of unreliable foreign firms, groups and individuals that harm the interests of Chinese companies, as a slate of retaliatory tariffs on imported U.S. goods.

With the US and China set for a long drawn out trade war, the markets have begun pricing the possibility the Federal Reserve will cut its target rate by a half-percentage point by year-end. Goldman Sachs also sees a higher chance of rate cut but believes it is a close call as the economic outlook has not changed much.

Data from a private survey on Monday showed that Chinese manufacturing activity was better than expected in May. The Caixin/Markit factory Purchasing Managers' Index for May was 50.2. The PMI reading for April was 50.2. PMI readings above 50 indicate expansion, while those below that signal contraction. Last week, China's official manufacturing PMI for May came in at 49.4, lower than April's reading of 50.1. The official non-manufacturing PMI for May was 54.3 unchanged from April.

Blue chips were mixed. HSBC (00005) slipped 1.3% to HK$63.25 on reports that the global banking group plans to cut at least 500 headcounts. HKEX (00388) fell 1.6% to HK$245.4. Tencent (00700) gained 1.2% to HK$330 after Investec maintained its HK$390 target price for the internet tech giant. China Mobile (00941) advanced 2.3% to HK$70.05. But AIA (01299) shed 1.5% to HK$72.55.

Shares of casino players declined despite Macau gaming authorities said gross gaming revenues for May grew 10% to MOP25.95 billion. Melco International (00200) softened 1.8% to HK$15.42. Sands China (01928) declined by 5.1% to HK$33.7. SJM Holdings (00880) retreated 1.6% to HK$8.54. MGM China (02282) pounded 4.8% to HK$11.52. Galaxy Entertainment (00027) dipped 2.6% to HK$46.15. Wynn Macau (01128) sank 5.2% to HK$15.44.

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